In 1999, I was still working in High Tech sales/marketing (and getting very tired of life on airplanes). Working in RE has allowed me to watch my young children grow albeit at much lower earnings. Mine was a lifestyle choice and while I am consistently in the 10% of Realtors production wise, I could make more money working in my old career.
In 1999 my new house cost around $450K and was cheap in spite of an 8.5% fixed rate mortgage (I’m a conservative 30 yr guy).
In late 2003, it was about $650K and with interest rates in the mid to low 6’s it was affordable too. Just about anyone that had a good job and lived here more than a year or two had $100K to 200K to put down 20% and buy a house like mine.
In Feb 2004, my house went to $825K and stopped making sense from my perspective. Since then its gone up to about $925K.
If prices went up about 5% a year from late 2003 it would be in the mid 700’s which would make sense to me. Someone whose been here for several years would be able to move up to buy my home (5Br/3Ba 2800 sq ft in very nice master planned community with great schools which is likely their 2nd or 3rd home like it was for me) with 20 to 30% down. With a loan between 500 and 600K the payment would be around 3000 to 3500 which isnt too much for a household income of 150K to 200K. Homes like mine rent for around that very easily.
I know this back of the envelope type logic…but it makes sense to me intuitively.
To answer your other questions. The real inventory spike happened between July and October last year. I’d venture to guess North county Coastal isnt all that different from other areas with the possible exception of Downtown. As for what I attribute the price decreases to….the insanity has ended and we are headed back to a more normalized level which i beleive we should be at (mid 2003 pricing plus 10 to 15%). As for credit tightening, I dont see many 100% buyers anymore. Sales volume is down but the quality/qualifications of those that are buying is substantially higher on average than b4.
